Nat type 3??

i've heard so many people talking about having nat type 3, i have it as well. Everyone keeps saying it is bad. What is Nat Type 3?
How do I change the Nat type?
Why do people keep saying that it is bad?

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Nat 3 is the result of being hooked into a router without being properly setup for data transfer. essentially it is restrictive.

There are 3 ways to change your Nat type to type 2 or 1. (Nat type 2 meaning that it is properly setup without restrictions behind a router, and Nat 1 being a direct connection to the Internet).

1.) Hook the PS3 directly into the modem will result in a Nat type 1, but of course that means disconnecting everything but the ps3 and that's an unnecessary hassle.

2.) Going into the router settings and Port Forwarding the PS3's necessary ports to the Ps3's ip address.

3.) Probably the simplest (on most routers) and most effective is to go into the router and set the PS3's ip address in the DMZ (DeMilitarized Zone), essentially the router doesnt have any say from what comes and goes to the Ps3, which is good so the connection isn't hampered.

I have a D-Link router. I had UPNP enabled but the PS3 said I was NAT type 3. I enabled an option called "Gaming Mode" and that allowed me to move to NAT type 2. Although I'm new to PS3 and am unsure if people are developing ways to hack into PS3s this method can save you putting the PS3 in the DMZ.
As far as port forwarding (at least for Dlink)
I see there is 4 entries for Port forwarding for the PS3
2 from LAN to WAN & 2 from WAN to LAN (Inbound & Outbound) Looks like it's best to allow UPNP & Gaming Mode to take care of it, otherwise you'll have to enter 2: Inbound and Outbound

The following should take care of the problem:
INBOUND
Click "Enabled"
For name type whatever, perhaps "PS3 IN"
Click "Allow"
Change Source Interface to "WAN"
IP Start & End, put in a star "*" for each
Change Destination Interface to "LAN"
IP Start & End, put the PS3 IP in start - its best to give PS3 a static IP if you have alot of computers in the house
For schedule Click "Always"
For protocol put a star "*" in both
For ports put a star "*" in both
Click Apply